If you are currently planning to start your first LLC in South Carolina but don’t know much about the process, this guide might just be what you need. Even if you end up working with an LLC formation service instead of doing it on your own, it’s always a good idea to learn about the key steps of company formation. Here you will find basic information about registration, LLC filings, and South Carolina’s compliance rules.
Name a South Carolina LLC
- Name a South Carolina LLC
- Appoint a South Carolina Registered Agent
- File the Articles of Organization
- Obtain an EIN for a South Carolina LLC
- Write an LLC Operating Agreement
- Fulfill a South Carolina LLC’s Additional Legal Obligations
Finding an LLC business name in South Carolina that’s both free and unique can be challenging, especially considering the breadth of the domestic market. According to the state’s LLC act, a name should:
- Be distinct from the names of existing SC entities, including:
- Valid names of active corporations, partnerships, and LLCs;
- Reserved names;
- Include its structure type:
- “Limited liability company”
- “Limited company”
- “L.L.C.”, “LLC”, “L.C.”, or “LC”.
- “Ltd.” + “Co.”.
However, even an already taken name could be used if the applicant is authorized by a relevant court or the existing company with the identical name has undergone a merger with another entity, been reformed, or acquired the assets and name of another company.
Determine LLC Name is Available
But how can you be sure that your name choice is available? The best way to do this is to perform a business name search with the tools offered directly by the state. You can check LLC names through the business name database or by consulting an attorney who may have access to additional databases for the South Carolina LLC search.
South Carolina LLC Name Reservation
Another option for ensuring your name remains available in the time between your decision to create an entity and actually starting a South Carolina LLC is to apply for a name reservation. There are three ways you can reserve an LLC name in South Carolina:
Applying online can save you a lot of time and raise your approval chances. You can find the relevant form (in this case, §33-44-106) at the Business Entities Online Portal. The state’s reservation period extends to 120 days and cannot be renewed upon its expiration. The $25 filing fee can also be paid online.
Mail or In Person
If you find physical documents more reliable, use the physical application form. In this case, you should submit two copies in the self-addressed stamped envelope. The original form, its duplicate or certified copy, the $25 payment check should be sent to:
Secretary of State
Attn: Corporate Filings
1205 Pendleton Street Suite 525
Columbia, SC 29201
Columbia residents and visitors may also apply in person at the same address.
Appoint a South Carolina Registered Agent
In the South Carolina Uniform Limited Liability Company Act, the agent for service of process is the definition given to what is commonly known as a registered agent who acts as a delegate of sorts between the entity and the state.
This includes maintaining reliable lines of communication, receiving LLC legal documents, court orders, and other correspondence on behalf of the company, and forwarding it through mail as well as electronically.
A South Carolina LLC registered agent can be:
- An individual who is a legal resident and at least 18 years of age;
- A domestic entity of any designation with valid permits;
- A foreign entity authorized to conduct business in the state.
No business is authorized to perform commercial transactions without such an agent. In other words, it would be impossible to conduct an LLC in South Carolina without having a permanent agent.
Individual as South Carolina Registered Agent
Almost any natural person can act as an agent of service of process as long as they are resident of the state and have reached the age of majority. For this reason, many entrepreneurs choose to appoint someone they already know, for example, a family member or a friend. And while it can certainly reduce the costs, be wary of the fact that this position requires familiarity with state law and various related procedures.
Registered Agent Service
Many choose to delegate these duties to a professional attorney, but given how costly this option tends to be, some owners opt for a formation company instead.
Even if you don’t plan to use these companies for registration, many of them still offer affordable registered agent services separately. Providers like IncFile even include a year of free registered agent service, though only under the condition you hire them to oversee the formation as a whole.
If you want to be absolutely sure of the expert knowledge of your agent, Northwest Registered Agent comes highly recommended for this exact reason since they specialize in this exact service and don’t outsource their agents.
File the Articles of Organization
The official start of any company is marked by an organizer, either a single person or multiple, submitting South Carolina Articles of Organization with the Secretary of State. An LLC becomes active as soon as the articles are approved, although it’s possible to specify the date on which the entity becomes effective.
The state asks for the following information to be included in the LLC Articles of Organization:
- Entity name;
- Registered office;
- Registered agent information;
- Names and addresses of the organizer(s);
- Company duration;
- Managerial body information if the company is to be manager-operated;
- Allocation of liability and rights between company members.
All South Carolina LLC formation documents can be filed either by mail/in person or online.
The fastest possible way of creating an LLC in South Carolina is to register online through the state’s Online Business Filings page. Although the $125 service fee is pretty high, your application will be reviewed within 1-2 business days, and sometimes even on the same day.
By Mail/In Person
Handling physical documents is still something many people prefer. You can find all paper applications on the Secretary of State’s downloadable forms page. Once you complete the form, send the printout to:
South Carolina Secretary of State’s Office
Attn: Corporate Filings
1205 Pendleton Street, Suite 525
Columbia, SC 29201
Alternatively, deliver the documents personally if it’s more convenient for you due to your location. Mail filings will take up to 2 weeks to process, while in-person submission can often be reviewed on the same day.
Obtain an EIN for a South Carolina LLC
Once your registration is approved, it’s time to move onto compliance steps, one of which is to get an EIN in South Carolina.
Although there is no hard rule that obligates you to get a Federal Employer Identification Number, you might still need it for various business transactions. This nine-digit number is assigned to entities by the IRS to keep track of individual tax activities.
As such, this number is required for companies that:
- Have employees;
- Plan to hire employees;
- Are subject to mandatory South Carolina taxes;
- Are classified as multi-member LLCs;
- Adhere to a corporate taxation system.
An EIN can be obtained by mail, phone, fax, or online. The IRS does not charge you for it. Note that the applicant must provide their SSN to register.
If you are opening an LLC in South Carolina with yourself as its sole member, you can use your SSN for tax-related purposes instead of registering for this ID.
The fastest way to get your identification is to file online since these applications are reviewed immediately, and your number will be issued on the spot.
When sending your Form SS-4 through the post, be ready to expect longer waiting periods. The IRS usually reviews these applications within 4-5 weeks. All documents should be directed to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
This method is a bit faster than the previous option and will only take about a week. Simply fill out Form SS-4 and fax it to:
Be sure to include the return number, otherwise, the review time could extend to two weeks.
Write an LLC Operating Agreement
An operating agreement is one of the defining documents—though it can also be conducted in oral form—that describes the precise nature of the company’s internal relations, procedures, responsibilities, and more.
This document is usually drafted to include all initial and active members with the purpose to structurize the entity’s conduct and regulate the working relationships between the membership group, potential managerial body, and the LLC itself.
Despite not being mandatory, the operating agreement remains a highly recommended step. This document presents a set of rules that can help run an LLC in South Carolina while avoiding internal conflicts. If you do decide to create one, remember to heed South Carolina operating agreement guidelines.
According to them, an operating agreement may:
- Outline responsibilities of members, employees, or managers;
- Determine the standards of conduct;
- Assign the power of authority in regards to various procedures or transactions;
- Describe dissolution procedures to avoid South Carolina default laws etc.
Similarly, this document should in no way do the following:
- Reduce the duty of care;
- Absolve the governing members of the obligation of good faith and fair dealing;
- Infringe on personal rights;
- Contradict existing state and federal laws etc.
Given how murky the law can be in this respect, many entrepreneurs choose to either hire an attorney or use templates provided by companies like ZenBusiness who offer a free LLC operating agreement with their formation bundles. You can also find free samples online, but they tend to be pretty general in nature.
Fulfill a South Carolina LLC’s Additional Legal Obligations
To operate in South Carolina, all entities must be licensed. It’s virtually impossible to run a company without a South Carolina business license. It costs $50 upon the initial registration and $100 for each renewal.
There is also the matter of specific industry licenses, for example, if you sell goods and services. Operating without an appropriate LLC license in South Carolina may lead to LLC dissolution or even arrest if such activity is ruled fraudulent by a court.
Get Business Permits and Licenses
Licensing largely depends on your jurisdiction, business type, primary industry, and professional occupation. For more information, visit the Department of Labor, Licensing and Regulation website. There you can find which occupations mandate special permits, what types of licenses each industry requires, and much more.
Pay LLC Taxes
One of the many reasons entrepreneurs choose to form a South Carolina LLC is the state’s incredibly favorable tax conditions. Tax requirements in South Carolina may not be the most lenient in the country, but they do have considerable benefits.
Moreover, the LLC, being a pass-through structure, exempts the owners from federal income taxes. Instead, the members record their profits and losses on their personal returns.
South Carolina imposes no property tax or local income tax, and unless an LLC chooses a corporate taxation system, it will also be exempt from federal taxes. Electing such a system is less detrimental compared to some states due to South Carolina’s 5% corporate tax rate.
Rather than paying the income tax, LLC members must instead cover the FICA or self-employment tax. This tax applies to all company profits at the rate of 15.3%.
After you’ve completed South Carolina’s online Business Tax Registration, it’s time to figure out which taxes apply to your company.
All businesses that sell goods and services must pay the sales and use tax at the rate of 6%. You can register for it online or by using a paper application. Keep in mind that certain jurisdictions may increase this rate from anything between 7-9%.
If your business is involved in the retail of manufacturing or other industrial equipment, you will be exempt from this tax.
Another strong point in favor of forming an LLC in South Carolina is the state’s reporting protocol. As for annual reports, South Carolina LLC filing requirements are distinct from other jurisdictions.
Here you won’t be tasked with submitting initial or annual reports unless your LLC has elected a corporate taxation system. In this case, you will need to submit the Initial Report of Corporations as well as subsequent annual reports using Form SC 1120/SC 1120S.
Although the general registration procedure is not exactly complex, South Carolina has quite a few confusing tax and formation laws that could pose some difficulty for beginners as well as foreign LLCs intending to expand.
And while it’s possible to launch an SC company by yourself, hiring or advising a professional is by far a more reliable course of action. If your budget can afford it, it’s always preferable to work with a business attorney. Otherwise, you can always hire one of the popular LLC creation services that could do it at half the price and even assist with ongoing compliance.